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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 26, 1997 Commission File No. 1-9656
LA-Z-BOY INCORPORATED
(Exact name of registrant as specified in its charter)
MICHIGAN 38-0751137
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1284 N. Telegraph Road, Monroe, Michigan 48162-3390
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number - Area Code (313) 242-1444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES, $1.00 Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form
10-K or any amendment to this Form 10-K. X
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant as of June 20, 1997 was $638,020,555.
The number of common shares of the Registrant outstanding on June 20,
1997 was 17,972,410.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1997 Annual Report to Shareholders for the year ended
April 26, 1997 are incorporated by reference into Parts I, II and IV.
Portions of the Annual Proxy Statement filed with the Securities and
Exchange Commission June 27, 1997 are incorporated by reference into Part
III.
PART I
ITEM 1. BUSINESS.
In fiscal year 1997, the Registrant changed its name from La-Z-Boy
Chair Company to La-Z-Boy Incorporated to better reflect the broadening
nature of the Registrant's business, which includes manufacturing chairs as
well as many other types of home and office furnishings. Other information
required in Part I, Item 1, section (a) is contained in Note 2 of the
Registrant's 1997 Annual Report on page 21, and is incorporated herein by
reference.
(b)-(c) (1) (i) Principal Products
The Registrant operates in the furniture industry and as such does not
have differing segments. "Residential" dealers are those who resell to
individuals for their home use. "Business Furniture" dealers are those
who resell seating and casegood products to commercial dealers. Additional
information regarding products and market share data is contained in the
Registrant's 1997 Annual Report on page 26 in the Background section of the
Management Discussion and Analysis and is incorporated herein by reference.
(c) (1) (ii) Status of New Products or Segments
During fiscal year 1997, the Registrant did not add any major products
or segments.
(c) (1) (iii) Raw Materials
The principal raw materials used by the Registrant in the manufacture
of its products are hardwoods for solid wood dining room and bedroom
furniture, casegoods, occasional tables and for the frame components of
seating units; plywood and chipwood for internal parts; veneers for dining
room furniture, wall units, and occasional tables; water-based and liquid
finishes (stains, sealants, lacquers) for external wood; steel for the
mechanisms; leather, cotton, wool, synthetic and vinyl fabrics for covers;
and polyester batting and non-chlorofluorocarbonated polyurethane foam for
cushioning and padding. Steel and wood products are generally purchased from
a number of sources, usually in the vicinity of the particular plant, and
product-covering fabrics and polyurethane are purchased from a substantial
number of sources on a mostly centralized basis. The Registrant fabricates
many of the parts in its products, largely because quality parts made to its
exact specifications are not obtainable at reasonable cost from outside
sources.
Raw material costs historically have been about 38 percent of sales
in the upholstery operations and a somewhat higher percentage in the
casegoods operations. Purchased fabric (which includes leather) is the
largest single raw material cost representing about 41 percent of total
upholstery product material costs. Polyurethane (poly) foam and lumber are
the next two largest types of upholstery raw material costs. Poly is highly
sensitive to changes in the price of oil. Price increases for raw materials
have kept pace with the inflation rate in recent years and are expected to
continue to do so.
Lumber, like most commodities, historically has had sharp changes in
prices over the short term and long term. The Registrant is usually not as
affected by these changes as much as many other furniture manufacturers due
to the large percentage of upholstered goods manufactured that do not
require as much lumber as casegoods. Also, wood substitutes, (e.g. steel,
plastic) can be used to some degree in upholstered products.
(c) (1) (iv) Patents, Licenses and Franchises or Concessions
The Registrant has a number of patents on its reclining chair and
rocking chair mechanisms which it believes were important to the early
success of the Registrant and to its present competitive position. It
believes, however, that since it is so firmly established in the industry,
the loss of any single or small group of patents would not materially affect
the Registrant's business. The Registrant has no material licenses,
franchises or concessions.
(c) (1) (v) Seasonal Business
The Registrant generally experiences its lowest level of sales during
its first quarter. When possible, the scheduling of production is designed
to maintain generally uniform manufacturing activity throughout the year,
except for mid summer plant shutdowns to coincide with slower sales.
(c) (1) (vi) Practices Regarding Working Capital Items
The Registrant does not carry significant amounts of upholstered
finished goods inventory to meet rapid delivery requirements of customers or
to assure itself of a continuous allotment of goods from suppliers. Normal
customer terms provide for one payment due within 45 days with a 1 percent
discount within 30 days (one installment, 1 percent discount 30 net 45).
Extended dating is often offered on sales promotions.
Most casegoods finished goods inventories are built to provide for
quicker delivery requirements of customers without installment credit terms,
therefore, resulting in higher levels of finished product on hand at any
period in time than the upholstered products. Kincaid and Hammary divisions
primarily sell casegood products. Casegoods are also sold through the
Business Furniture Group.
(c) (1) (vii) Customers
The Registrant distributes to almost 15,000 locations. The Registrant
does not have any customer whose sales amount to 10 percent or more of its
consolidated sales for fiscal year 1997. The Registrant's approximate dealer
mix consisted of 41 percent proprietary, 13 percent to major dealers (Mont-
gomery Ward and other department stores) and 46 percent to general dealers.
The Registrant's largest customer, Montgomery Ward, announced that it has
filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy
Code. The Registrant is currently evaluating the impact this will have on
receivable reserves. However, the effect is not expected to be material.
Proprietary stores consist of stores dedicated to the sale of La-Z-Boy
products and in-store dedicated galleries. The dedicated stores include
La-Z-Boy Furniture Galleries stores and Showcase Shoppes. In-store dedicat-
ed galleries have been established for each of the Registrant's divisions.
(c) (1) (viii) Orders and Backlog
It has been determined that the majority of the Registrant's
Residential Division orders are for dealer stock, with approximately 35
percent of orders being requested directly by customers. Furthermore,
about 9 percent of units produced at all divisions are built for the
Registrant's inventory. The remainder are "built-to-order" for dealers.
As of May 31, 1997 and June 1, 1996 backlogs were approximately $81
million and $73 million, respectively. These amounts represent less than
five weeks of sales. On average, orders are shipped in approximately five
weeks. Any measure of backlog at a point in time may not be indicative of
future sales performance. The Registrant does not rely entirely on backlogs
to predict future sales since the sales cycle is only five weeks and backlog
can change from week to week.
The cancellation policy for La-Z-Boy Incorporated, in general, is
that an order cannot be canceled after it has been selected for production.
Orders from prebuilt stock, though, may be canceled up to the time of
shipment.
(c) (1) (ix) Renegotiation Contracts
The Registrant does not have any material portion of business which
may be subject to renegotiation of profits or termination of contracts or
subcontracts at the election of the Government.
(c) (1) (x) Competitive Conditions
The Registrant believes that it ranks third in the U.S. in dollar
volume of sales within the Residential furniture industry, which includes
manufacturers of bedroom, dining room and living room furniture.
The Registrant competes primarily by emphasis on quality of its
products, dealer support and a lifetime warranty on the reclining and
legrest mechanisms.
The Registrant has approximately fifteen major competitors in the U.S.
reclining or motion chair field and a substantially larger number of
competitors in the upholstery business as a whole, as well as in the case-
goods and Business Furniture businesses.
(c) (1) (xi) Research and Development Activities
The Registrant spent $8.3 million in fiscal 1997 for new product
development, existing product improvement, quality control, improvement of
current manufacturing operations and research into the use of new materials
in the construction of its products. The Registrant spent $8.0 million in
fiscal 1996 on such activities and $7.9 million on such activities in fiscal
1995. The Registrant's customers generally do not engage in research with
respect to the Registrant's products.
(c) (1) (xii) Compliance with Environmental Regulations
Information relating to Compliance with Environmental Regulations
(Note 11 of the Consolidated Financial Statements appearing on pages 25 and
26 and the environmental discussion contained within the Management Discuss-
ion and Analysis appearing on page 28 of La-Z-Boy Incorporated's Annual
Report to Shareholders for 1997) is incorporated herein by reference.
(c) (1) (xiii) Number of Employees
The Registrant and its subsidiaries employed 11,236 persons as of
April 26, 1997 and 10,733 persons as of April 27, 1996.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
The Registrant does not make any material amount of sales of up-
holstered furniture to foreign customers. The Registrant sells upholstered
furniture to Canadian customers through its Canadian subsidiary, La-Z-Boy
Canada Limited. Sales in Europe also occur through the Registrant's
recently acquired subsidiary Centurion Furniture plc, a furniture manu-
facturer in the United Kingdom. See Note 2 of the Notes to Consolidated
Financial Statements for more details on Centurion Furniture plc.
The Registrant also derives a small amount of royalty revenues from
the sale and licensing of its trademarks, tradenames and patents to certain
foreign manufacturers.
Export sales are increasing, and are less than 2% of sales.
ITEM 2. PROPERTIES.
In the United States, the Registrant operates twenty-nine manufactur-
ing plants (most with warehousing space), has an automated fabric processing
center and has divisional and corporate offices. The Registrant has one
manufacturing plant in Canada. Some locations listed below have more than
one plant.
The location of these plants, the approximate floor space, principal
operations conducted, the average age and the approximate number of
employees at such locations as of April 26, 1997 are as follows:
Floor Space Average Number of
Location (square feet) Operations Conducted Age Employees
----------- ------------- ------------------------- --------- ----------
Clearfield, 48,000 Upholstering and -- 49
Utah assembly of upholstery
Dayton, 909,320 Manufacture, assembly 14 1,890
Tennessee and warehousing of
upholstery
Florence, 416,249 Manufacture, assembly 27 453
South Carolina and warehousing of
upholstery
Florence, 48,400 Fabric processing 20 17
South Carolina center
Grand Rapids, 440,000 Manufacture and assembly 82 98
Michigan of Business furntiure/
systems*
Hudson area, 1,072,745 Manufacture, assembly, 31 1,173
North Carolina and warehousing of
(Kincaid) casegoods and division
office
Leland, 311,990 Manufacture, assembly and 21 342
Mississippi warehousing of Business
Furniture casegoods
and upholstery
Lenoir area, 654,688 Manufacture, assembly & 29 546
North Carolina warehousing of primarily
(Hammary) casegoods and some
upholstered products and
division office
Lincolnton, 375,823 Manufacture, warehousing, 29 253
North Carolina and assembly of upholstery
Monroe, 242,235 Corporate office, Residential 47 547
Michigan and Business Furniture Group
offices and R & D
Neosho, 560,640 Manufacture, assembly 21 1,195
Missouri and warehousing of
upholstery
New Tazewell, 696,484 Manufacture, assembly 7 1,299
Tennessee and warehousing of primarily
(England/Corsair) upholstery and division office
Newton, 640,707 Manufacture, assembly and 20 1,289
Mississippi leather cutting, plywood
cutting and warehousing of
upholstery
Redlands, 189,125 Upholstering, assembly 27 321
California and warehousing of
upholstery
Siloam Springs, 399,616 Upholstering, warehousing, 2 408
Arkansas and assembly of upholstery
Tremonton, 672,770 Manufacture, assembly 12 952
Utah and warehousing of
upholstery
Waterloo, 257,340 Assembly and warehousing 27 404
Ontario and of upholstery and
(La-Z-Boy division office
Canada) _________ __ ______
7,936,132 24 11,236
========= == ======
* Note: The Grand Rapids plant is in the process of being shutdown.
Operations are planned to end by the end of August, 1997. Buildings
representing 330,000 square feet have been sold.
The Monroe, Michigan; Redlands, California; Dayton, Tennessee; Water-
loo, Ontario, Canada; Lincolnton, North Carolina; Grand Rapids , Michigan (a
110,000 square foot building); Lenoir, North Carolina; Hudson, North
Carolina; New Tazewell, Tennessee and the Newton, Mississippi woodworking
plants are owned by the Registrant. The Florence, South Carolina; Neosho,
Missouri; Newton, Mississippi; Siloam Springs, Arkansas and Tremonton, Utah
plants as well as the automated Fabric Processing Center were financed by
the issuance of industrial revenue bonds and are occupied under long-term
leases with government authorities. The Leland, Mississippi plant is under
a long-term lease between the Board of Supervisors of Washington County,
Mississippi (lessor) and La-Z-Boy Incorporated (lessee). These leases are
capitalized on the Registrant's books. The Clearfield, Utah plant is under
a long term lease.
The Registrant believes that its plants are well maintained, in good
operating condition and will be adequate to meet its present and near future
business requirements.
ITEM 3. LEGAL PROCEEDINGS.
Information relating to certain legal proceedings (Note 11 of the
Consolidated Financial Statements appearing on page 25 of La-Z-Boy
Incorporated's Annual Report to Shareholders for 1997) is incorporated
herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were voted upon during the fourth quarter of 1997.
PART II
The information required in Part II (Items 5 through 8) is contained
in the La-Z-Boy Incorporated's Annual Report to Shareholders for 1997, in
the Financial Report pages 17 through 31, and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
The information required in Part III (Items 10 through 13) is contain-
ed in the Registrant's proxy statement dated June 27, 1997 on pages 1
through 13 and 18, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
Listed below are all the documents filed as part of this report:
(a) Index to Financial Statements
(1) Financial Statements:
Page in Exhibit I
Report of Independent Accountants on Financial
Statement Schedule............................................S-2
(2) Financial Statement Schedule:
II Valuation and Qualifying Accounts............................ S-3
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) Exhibits:
(3)(a) Restated Articles of Incorporation (filed on Form 10-Q dated
November, 12 1996 (Commission File No. 1-9656) and is
incorporated herein by reference).
(b) By-laws (filed on Form 10-Q dated November 12, 1996 (Commission
File No. 1-9656) and is incorporated herein by reference).
(4)(a) Form of certificate for Common Stock $1.00 (filed herewith).
(b) Instruments defining the rights of holders of long-term debt
are not filed herewith, pursuant to paragraph (4)(iii) of
Regulation S-K Item 601. The Registrant will furnish all such
documents to the Securities and Exchange Commission upon its
request.
*(10)(a) La-Z-Boy Chair Company 1993 Performance-Based Stock plan (filed
as Exhibit A to Registrant's proxy statement dated June 25,
1993 (Commission File No. 1-9656) and incorporated herein by
reference).
*(b) La-Z-Boy Chair Company Amended and Restated 1996 Performance
Based Stock Plan (filed as Exhibit A to Registrant's proxy
statement dated June 28, 1996 (Commission File No. 1-9656) and
incorporated herein by reference).
*(c) La-Z-Boy Chair Company Restricted Stock Plan for Non-Employee
Directors (filed as Exhibit B to Registrant's proxy statement
dated July 6, 1989 (Commission File No. 1-9656) and incorporat-
ed herein by reference).
*(d) La-Z-Boy Incorporated Executive Incentive Compensation Plan
Description (filed herewith).
*(e) La-Z-Boy Chair Company Supplemental Executive Retirement Plan
dated May 1, 1991 (filed as an exhibit to Registrant's Current
Report on Form 8-K dated February 6, 1995 (Commission File No.
1-9656) and incorporated herein by reference).
*(f) La-Z-Boy Chair Company Amended and Restated 1989 Restricted
Share Plan (filed as Exhibit A to Registrant's proxy statement
dated July 6, 1989 (Commission File No. 1-9656) and incorporat-
ed herein by reference).
*(g) La-Z-Boy Chair Company 1986 Incentive Stock Option Plan (filed
as Exhibit B to Registrant's proxy statement dated June 26,
1986 (Commission File No. 1-9656) and incorporated herein by
reference).
*(h)(1)Form of Change in Control Agreement (filed as an exhibit to
Registrant's Current Report on Form 8-K dated February 6, 1995
(Commission File No. 1-9656) and incorporated herein by
reference).
(h)(2)Employees who are parties to the Change in Control Agreement
(filed herewith).
*(i) Form of Indemnification Agreement and list of Registrant's
directors who are parties thereto (filed as an exhibit to Form
8, Amendment No. 1 dated November 3, 1989 (Commission File No.
1-9656) and incorporated herein by reference).
(j) Amended and Restated Reorganization Agreement with England/
Corsair, Inc. (filed as Annex A to Registrant's Form S-4
Registration Statement dated April 7, 1995 (Commission File No.
33-57623) and incorporated herein by reference).
*(k) Description of loan to Mr. C.T. Knabusch (filed herwith).
*(l) Summary Plan Description and Partial Plan Document for the La-
Z-Boy Incorporated Personal Executive Insurance Program
description (filed herewith).
(13) Portions of the 1997 Annual Report to Shareholders (With the
exception of the information incorporated in Part I and II, this
document is not deemed to be filed as part of the report on Form
10-K).
(21) List of subsidiaries of La-Z-Boy Incorporated (filed herewith).
(23) Consent of Price Waterhouse LLP (filed herewith).
(27) Financial Data Schedule (Edgar only)
* Indicates a contract or benefit plan under which one or more executive
officers or directors may receive benefits.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LA-Z-BOY INCORPORATED
/s/C. T. Knabusch
BY ------------------------ July 24, 1997
C. T. Knabusch
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below, as of July 24, 1997, by the following
persons on behalf of the Registrant and in the capacities indicated.
/s/E.J. Shoemaker
- -------------------------- --------------------------
E.J. Shoemaker L.G. Stevens
Executive Vice President Director
of Engineering, Director and Vice
Chairman of the Board
/s/C.T. Knabusch /s/J.F. Weaver
- -------------------------- --------------------------
C.T. Knabusch J.F. Weaver
Chairman of the Board, President Director
and Chief Executive Officer
/s/G.M. Hardy /s/D.K. Hehl
- -------------------------- --------------------------
G.M. Hardy D.K. Hehl
Secretary and Treasurer, Principal Director
Accounting Officer and Director
/s/F. H. Jackson
- -------------------------- --------------------------
F. H. Jackson R.E. Lipford
Vice President of Finance, Prinicpal Director
Financial Officer and Director
/s/H.G. Levy
- -------------------------- --------------------------
P.H. Norton H.G. Levy
Senior Vice President Sales and Director
Marketing and Director
--------------------------
J.W. Johnston
Director, Mr. Johnston is the
son-in-law of E.J. Shoemaker
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) and ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
YEARS ENDED APRIL 26, 1997, APRIL 27, 1996, AND APRIL 29, 1995
LA-Z-BOY INCORPORATED
MONROE, MICHIGAN
INDEX TO FINANCIAL STATEMENTS
The financial statements, together with the report thereon of Price
Waterhouse LLP dated May 29, 1997 appearing on pages 17 through 31 of the
accompanying 1997 Annual Report to Shareholders are incorporated by
reference in this Form 10-K Annual Report. With the exception of the
aforementioned information, and the information incorporated in Part II, the
1997 Annual Report to Shareholders is not to be deemed filed as part of this
report. The following financial statements schedule should be read in
conjunction with the financial statements in such 1997 Annual Report to
Shareholders. Financial statement schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
FINANCIAL STATEMENT SCHEDULE
1997, 1996, AND 1995
Report of Independent Accountants on Financial
Statement Schedule
Schedule II Valuation and Qualifying Accounts
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
La-Z-Boy Incorporated
Our audits of the consolidated financial statements referred to in our
report dated May 29, 1997 appearing on Page 17 of the 1997 Annual Report to
Shareholders of La-Z-Boy Incorporated (which report and consolidated
financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement
Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE LLP
Toledo, Ohio
May 29, 1997
LA-Z-BOY INCORPORATED AND SUBSIDIARIES SCHEDULE II VALUATION
AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Trade
accounts
Additions receivable
Balance at charged to Acquisition "written off" Balance
beginning costs and of operating net of at end of
Description of period expenses division recoveries period
- ------------- ----------- ----------- ------------- ------------- ----------
Year ended
April 26, 1997
Allowance for
doubtful accounts
& long-term
notes $18,033 $5,688 $4,790 $18,931
Accrued
Warranties $9,577 $1,198 $10,775
Year ended
April 27, 1996:
Allowance for
doubtful accounts
& long-term
notes $17,829 $5,530 $5,326 $18,033
Accrued
Warranties $8,450 $1,127 $9,577
Year ended
April 29, 1995:
Allowance for
doubtful accounts
& long-term
notes $14,795 $5,847 $92 $2,905 $17,829
Accrued
Warranties $6,650 $1,350 $450 $8,450